Harvard's Feldstein Says U.S. Economy in Recession that could be worst since WWII

Edited on Sat Mar-15-08 07:42 AM by marmar

from Bloomberg:

Harvard's Feldstein Says U.S. Economy in Recession (Update1)

By Matthew Leising and Steve Matthews

March 14 (Bloomberg) -- Harvard University economist Martin Feldstein, a member of the group that dates business cycles in the U.S., said the nation has entered a recession that could be the worst since World War II.

``I believe the U.S. economy is now in recession,'' Feldstein, president of the National Bureau of Economic Research, told the Futures Industry Association conference in Boca Raton, Florida. ``Could this become the worst recession we have seen in the post-war period? I think the answer is yes. I would emphasize the word `could.' ''

Feldstein's remarks represent the first time that a member of the NBER's business-cycle dating committee has publicly described the current downturn as a recession. The economy may not respond quickly to Federal Reserve interest-rate cuts, and a package of tax rebates and investment incentives will offer only a temporary boost, he said.

Investors today raised their bets that the Fed will slash interest rates by a full percentage point next week after the central bank and JPMorgan Chase & Co. agreed to provide emergency funding to Bear Stearns Cos., the fifth-largest U.S. securities firm.

Bush administration officials including Treasury Secretary Henry Paulson have avoided saying the economy is in a recession.

``We have slowed down very significantly,'' Paulson said in a National Public Radio interview yesterday. ``I'm not getting into'' whether it is a recession.

The economy expanded 0.6 percent at an annualized pace last quarter, and economists surveyed by Bloomberg News this month predicted the pace will slow to 0.1 percent in January to March. ...........(more)

our lenders to make sure we don't totally default. When I was in lending/collecting, the biggest customers had the banks by the nuts, and the lenders made sure they didn't completely fall apart. They may get sold off, but they were still operational, although "sacrifices" were made by those lowest on the totem pole.

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